Effective Oct. 28, 2004, the Check Clearing for the 21st Century Act (“the Act”) improved the ability of banks to use electronic images of paper checks by, for example, submitting those images, along with associated information, for electronic processing. Under the Act, if a receiving financial institution (“RI”) or its customer requires a paper check, a paper image replacement document (“IRD”), such as a paper “substitute check,” can be created from an electronic check image and associated electronic information. Such a substitute check meeting specified requirements is the legal equivalent of an original paper check, and an RI is required to accept the substitute check for payment. This process enables banks to reduce the costs and inconveniences associated with physically handling and transporting original paper checks.
Under the Act, the substitute check must be essentially an exact copy of the original paper check to be the legal equivalent of the original paper check. In particular, the substitute check must include an exact copy of all of the Magnetic Ink Character Recognition (“MICR”) data provided on the original paper check and all check endorsements.
The terms “substitute check” and “IRD” generally are used interchangeably herein to refer to any electronic or paper document that can be used for electronic payment processing purposes, whether or not the document is the legal equivalent of a paper check negotiable instrument. The terms “bank,” “customer,” “RI,” and “processing entity” generally are used herein to refer to any party performing conventional or electronic check processing at any stage, including depositing and receiving institutions, their non-bank subsidiaries and affiliates, and any non-bank third party agents that provide processing services to banks.
Typically, each electronic check is received for processing in an electronic image cash letter file (hereinafter an “ICL file”), which includes one or more electronic image cash letters (“ICLs”). Each ICL includes one or more bundles of items to be processed. Each bundle includes one or more items. The term “item” is used herein to refer to a check or an IRD or information that represents a check or an IRD. For a particular item, the ICL can include one or more electronic images of the item, the complete MICR data provided on the item, and additional financial data related to the item, such as endorsement information (hereinafter, “addenda data”).
The ICL can further include a series of records related to the items. For example, for each bundle of items in the ICL, the ICL can include a bundle summary control record comprising information about the bundle, such as a bundle identification number, the number of items in the bundle, the value of each of the items in the bundle, and the total value of all the items in the bundle. The ICL also can include an ICL control record comprising information about the origin and destination of the ICL, and a cash letter bundle summary control record comprising a summary of all the bundle summary control records in the ICL. For simplicity, each ICL, bundle, item, image, record, or other component of an ICL file is referred to herein as an “element” of the ICL file.
In the traditional, paper processing arena, each check could be seen and touched throughout processing. Thus, in the traditional, paper processing arena, it was virtually impossible to process the same check twice. However, with electronic check processing, multiple banks are processing the same checks in an electronic environment. Because the banks are producing and processing electronic copies of the checks, the same check may be reproduced and processed two or more times. Thus, a check processor may receive duplicate ICL files and/or ICL file elements. Similarly, a check processor may produce and present duplicate ICL files and/or ICL file elements for payment. To date, banks have been unable to efficiently correct errors resulting from duplicative presentment of ICL files and/or ICL file elements. Thus, a need exists in the art for a system and method to improve the efficiency with which banks and check processors correct duplication errors relating to electronic checks.